What You Need to Understand About Term Life Insurance
August 28, 2012
(Long Island, N.Y.) According to research from the Life Foundation, over 58 million households still lack what they feel to be adequate life insurance, one of the most vital insurance policies families can have. When you are in the process of buying life insurance, it is important to understand all of your options.Term life insurance, which is often classified as temporary life insurance, is a contract between the insured and the insurer that is valid for a specified period of time. Term insurance is typically the most affordable type of insurance on the market depending on the length of the contract. Because contracts are available in 1, 5, 10, 15, 20, 25, and 30 year terms, it is the applicant’s responsibility to determine which contract is best and what price they can afford.
Understanding the Relationship Between Length of Term and Premiums
When you invest in term life insurance, the insurer will request that you fill out an application stating how much insurance you would like and how long you would like your insurance to be valid. Before you do this, it is important to request quotes to see how the term you select will affect the premiums you will pay.
Generally speaking, when you select a shorter term, you will pay lower premiums. For example: If you have the option to buy a 10 year term or a 30 year term, the premiums for the 10 year term will be lower even when you select the same death benefit. This is because it is less risky for an insurer to provide coverage for 10 years than it is for the insurer to provide coverage for 30 years. In some cases, the premiums for shorter terms will be higher because the company will offer larger discounts for specific terms. It is your responsibility to request several different quotes to determine whether or not a premium discount is available.
What Happens When the Term is Up?
Unlike permanent life insurance, a term policy will expire once the term is up. The term will begin on the day that your policy is “bound” or approved. If you have a 10 year term that began on August 1, 2012, the term would expire on August 1, 2022. At this time, the policyholder will have the option to re-qualify for a new term insurance policy or to pay exorbitantly higher premiums without medically re-qualifying. You may also have the option to convert your term insurance policy into a permanent plan before it expires.
Term life insurance is the most popular choice today because it is affordable and it will provide the temporary protection that some families need. If you want to protect your family while there is a mortgage on your home or provide money for school for your children, these are technically temporary needs that will not always exist. If you select the right term, you can invest in protection until the need for protection no longer exists. Make sure you compare all of the policies offered by the different insurers in the industry. Be sure you consider the length of the contract, the amount of coverage it provides, and the insurer guaranteeing coverage before you make a choice.
The loss of someone you love is one of those things we all think or hope will never happen to us but it can and does each day, to someone. Anthony Hicks shares a heartfelt story in “If My Father Had Life Insurance.”
Equote.com contributed to this article. Since 1998, Equote.com has been providing insurance products including Term Life Insurance, no medical life insurance, instant life, whole, and universal policy quotes.
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